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He may run IT for one of the best-known names in technology, but even Microsoft's CIO is grappling with new technology challenges like moving to the cloud and handling consumer electronics that employees bring to work.

Tony Scott, CIO for Microsoft, spoke Wednesday to public sector CIOs gathered at the company's headquarters in Redmond, Washington.

His team manages over 200,000 Windows 7 and Office 2010 clients, 764,000 SharePoint sites, 1 million devices, 70,000 monthly Live Meeting sessions and the Microsoft.com website, which attracts 1.7 billion hits per day.

"We are Microsoft's first and best customer," he said. "That's a role we take seriously."

One of the first functions that he moved to the cloud was Microsoft.com, which he said is the world's largest corporate website. That is now running on Azure, Microsoft's platform-as-a-service offering.

He's in the process of moving Microsoft's volume licensing system to the cloud. That's the system that company CEO Steve Ballmer told Scott, during his job interview, is the most important system at Microsoft.

It's also the system that his IT staff ranked toward the bottom when asked about the health, supportability and flexibility of all the company's systems, he said.

"It's probably the single biggest system in Microsoft in terms of transactions and important company information," he said. The transition to running it in the cloud is well under way, he said.

Like most companies, Microsoft has struggled with some of the issues that moving to the cloud creates. Scott recommends, for example, making sure that CFOs are well informed.

"We've found awareness is half the battle," he said. CIOs should describe to CFOs exactly what moving to the cloud will cost and what kinds of cost spikes might occur potentially at different times of the year. At Microsoft, that was good enough to satisfy his CFO's need for predictability, Scott said.

In addition, using cloud services has different implications for chargebacks. At Microsoft, Scott forced all costs into two different categories. One includes costs that can be directly attributed to and thus charged to a business unit.

The other includes things like storage or network bandwidth that's too difficult or expensive to figure out who is consuming how much. Microsoft simply spreads those costs across the company evenly. IT's role is to make sure those services are bought and used efficiently, he said.

Scott, like many CIOs, has also come up with new policies to handle the kinds of consumer devices that workers are bringing into the office. Rather than make a decision based on individual devices, Microsoft has developed a framework that determines what capabilities a device must have in order for users to do certain things on it, he said.

"Devices come and go. I can't pivot my infrastructure every time there's a new device," Scott said.

While in a widely covered cutback over a year ago Microsoft stopped paying for employee iPhone contracts, IT still supports the phones. Microsoft workers have iPhones, iPads, Droids and many other devices, Scott said.

In addition, Microsoft gave all employees Windows Phone 7 devices. IT can control those devices and do things like enforce a PIN because the phones support Activesync. "Wherever we have Activesync we know what we can do with the device," Scott said.

Scott, and other CIOs, are also dealing with the changing roles of IT workers as the move to the cloud progresses.

David Stephens, director of technology services for Plano, Texas, recently moved to BPOS, Microsoft's hosted services offering that includes Exchange and SharePoint. The move created anxiety among IT workers who feared they'd become unnecessary and lose their jobs, he said. None have, because Stephens hopes the move to BPOS will free up IT administrators to work on the many projects they wanted to but couldn't because they were too busy managing servers and applications. Still, it's a struggle for the workers to make that transition toward projects and away from day-to-day maintenance, he said.

Scott said many of his peers are worried more generally about IT workers who are soon to retire, since the pipeline for new talent has changed. It used to be that consultants would hit a ceiling in their own organizations and decide to work internally at companies, becoming leaders. But with offshoring and budget cuts, that pipeline has dried up, he said.

At the same time, CIOs are being asked to do more than ever before, he said. "We're being asked to manage costs in different ways then we've ever been asked or challenged to before, and we're being asked to be accountable," he said. "CIOs are taking on the role of operations risk management."

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